Inquiry into cross-border home loans

Date: 05/06/1997

EUROPE's mortgage industry has launched an investigation into whether would-be home-owners are being prevented from shopping across borders for the best deal by national tax rules.

The issue of whether - and how easily - local tax perks can be claimed if a lender is based in another member state has not really been answered, according to the European Mortgage Federation.

It has therefore decided to launch its own investigation into how far tax obstacles could block moves towards a single mortgage market.

“We want to find out to what extent there are obstacles. It might just be more complex if a non-national mortgage is taken out. On the other hand, national rules might add up to a strong disincentive to taking a loan from anyone else,” said a federation spokesman.

Most EU governments offer some tax relief to new home-owners who take out mortgages, but whether such benefits can be claimed on a foreign loan is unclear.

The federation says that the explosion in second home-ownership across Europe has not spurred any detailed examination of this issue since these do not normally qualify.

Its move to highlight one of the key issues affecting the creation of a single EU lending market comes as consultants put the finishing touches to a report which will steer the European Commission's strategy on boosting consumer protection and fostering mortgage competition.

Consumer Affairs Commissioner Emma Bonino has earmarked the mortgage industry as a priority for action and, in the face of industry resistance, is considering widening existing consumer protection rules to the sector. But she has promised not to take any action before the consultants' report is completed.

The mortgage sector has come under scrutiny because it has lagged behind others in expanding out of local markets and offering EU-wide choice.

While the advent of a single currency should, in theory, spark more interest in non-national loans in the new euro-zone, the federation - which represents lenders providing 85&percent; of outstanding home loans in Europe - warns that the patchwork of national rules will still make it difficult for borrowers to shop around.